Sias asks Lian Beng to raise ‘lowball’ offer to a ‘fair and reasonable’ price   

THE Securities Investors Association (Singapore) or Sias is appealing on behalf of minority shareholders for Lian Beng to raise its offer price.

Sias president and chief executive David Gerald said he agreed with The Business Times‘ (BT) description of the S$0.62-per-share privatisation bid as a “lowball” offer in an Apr 19 article, after having studied the deal.

“To an impartial observer like Sias, S$0.62 does not appear to be ‘fair and reasonable’,” he wrote in a letter addressed to Lian Beng’s chairman, Ong Pang Aik, on Monday (Apr 24).

“The main reason for saying this is that for a property and construction group, asset value is the appropriate valuation benchmark and, in this regard, Sias notes that the offer is priced at a large 60 per cent discount to (Lian Beng’s) net asset value of S$1.54 as at end-November last year.”

The Sias chief compared this against the privatisation of Chip Eng Seng in February this year, which concluded at S$0.72 apiece to represent only an estimated 25 per cent discount to the construction company’s net asset value.

While Gerald said he acknowledged it was a “basic truth” in privatisation deals for offerors to pitch their offers as low as possible in order to extract maximum benefit from their purchase, he also emphasised that companies “should not short-change those who have put their trust in them”.

This is also considering how companies which have wooed their investors during the initial public offering phase have “made promises of good returns”, he said.

“Sias will not stand by and allow companies, which can afford to pay, to get away with lowball offers that are not fair and reasonable.” 

An upward revision of the offer price is “clearly warranted” in Gerald’s view, given Lian Beng’s strong financials with S$721.2 million in retained earnings, as well as S$246.9 million in cash.

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“Sias calls upon the offerors to do so and table a fair and reasonable offer price,” he wrote.

To recap, Lian Beng’s controlling Ong family launched its voluntary unconditional cash offer to buy out minority shareholders at its current offer price on Apr 11.

Citing low trading volume and the lack of a need for Singapore equity capital markets to finance its operations in the foreseeable future, the deal was touted as “a clean cash exit opportunity” for shareholders to liquidate and realise their investment in the company’s shares without incurring trading costs. 

The offeror plans to exercise its right to compulsorily acquire all the offer shares not acquired under the offer, should it receive valid acceptances in respect of not less than 90 per cent of the total number of issued shares.

Shares of Lian Beng were trading S$0.005 or 0.8 per cent lower at S$0.66 as at 4.16 pm on Monday.